Sunday, June 26, 2011

The same reporter for the NYT that wrote the February 27th, 2011 hit piece falsely suggesting Pennsylvania's drinking waters were poisoned with radionuclides is back at it. He has another NYT front page, sunday story attacking shale gas as a ponzi scheme and the industry as filled with Enrons. He just about calls for FBI raids.

The piece is already rocketing around facebook sites and the internet.

Reader beware. This reporter puts sensationalism ahead of fairness or truth. Pennsylvania's drinking waters are not poisoned with radionuclides, as substantial testing has verified, and the reading public should drink from this journalistic cup with great caution.

Could anyone imagine more sensationalistic narratives than Radiation, Ponzi, and Enron?

Consistent with this reporter's method, today's article uses often anonymous statements to paint a sensational narrative and leaves out or underplays critical information that is inconvenient to establishing the credibility of the dominant anti-gas narrative.

For example, the reader will not learn the following:

1. That 2010 natural gas production in the United States reached the highest levels since 1973 and neared record levels. Nor will the reader be told that the US produces more natural gas than any nation.

2. The reader will be told that natural gas prices fell by 66% due to the 2008 near depression, but the reader will not be told that US GDP in 2010 returned to 2007 size or that GDP has grown for 7 quarters.

3. The reader will not be told that actual large shale production has been the primary cause of low gas prices in 2010 and 2011, and the 2008 near depression has not been a factor in 2010 and 2011 pricing.

4. The reader will not be told that actual large shale gas production has shattered the historic pricing link between oil and gas and now oil prices have gone up while gas prices have gone down

5. The reader will not be told that, while oil prices have spiked up due to supply straining to meet demand, actual shale gas production has caused gas prices to decline.

6. The reader will be told that the alleged shale ponzi scheme could harm consumers, but the reader will not learn that actual shale gas production so far has saved a consumer heating with natural gas about $5 to $8 per thousand cubic feet or conservatively $500 per year.

7. The reader will again be warned that consumers could be hurt by the alleged ponzi scheme, but the reader will also not be told that actual shale gas production has lowered the wholesale price of electricity about 5 cents per kilowatt-hour and saved a residential electric consumer using 10,000 kilowatt-hours per year another $500 per year.

8. Though Pennsylvania and Marcellus had a starring role in the February 27th piece, the NYT reporter this time has just a couple sentences about the Marcellus. It is an interesting near exclusion.

9. All the reader is told about the Marcellus is that a Penn State professor reports well production is meeting or exceeding expectations in the Marcellus. No charts or bar graphs. No data. Nothing. Why? Very inconvenient facts for the ponzi, enron narrative is the answer.

10. The reader is not told that the well production data for the Marcellus is posted on the Pennsylvania Department of Environmental Protection. It is transparent and available to anyone.

11. The reader is told that liquids that can be produced with the natural gas can be valuable but no details. How valuable? Getting into this detail would be inconvenient to the ponzi, enron narrative.

12. The reader is told that improvements in shale gas drilling are lowering costs but no details. The details are impressive and in a separate posting we will discuss them. Again getting into this detail would be inconvenient to the ponzi, enron narrative.

And who are among the victims of the alleged Ponzi scheme? Exxon, Chevron, Shell, Statoil who all have made substantial investments in the Marcellus shale plays. They could be wrong. They could be victims of a crime. But they are incredibly sophisticated companies that engage in massive due diligence before making big investments.

The truth I suspect is something like this:

Substantial real and actual shale gas production has been a boon for consumers by driving down substantially the price of gas, saving them $1,000 or more in gas and electric bills.

Substantial, real actual shale gas production has prevented a broad energy shock by keeping gas and electricity bills stable in the United States when oil prices jumped this spring.

But booming shale gas production has been a mixed blessing for investors in gas because the success of the industry has caused the price of gas to fall sharply.

As the price of gas has fallen from $13 per thousand cubic feet in 2008 to $4.30 today, investors have not fared as well as they had expected, because returns on investment of some shale gas plays are lower than had gas been priced at the predicted $8.

Indeed at today's $4 gas, recent improvements that reduce substantially the cost of shale gas drilling and the revenues from gas liquids are vital to keeping gas wells economic.

If gas prices fall below $4, some shale gas wells will be shut in until prices return to profitable levels.

The Marcellus shale play remains the most attractive gas reserve for investors since its wells are meeting or exceeding production estimates; it has comparatively low-costs; it is located near areas consuming large amounts of gas; and portions of it are producing significant amounts of valuable liquids.

Now that is not a radioactive, ponzi, enron story. It is not sensationalistic. Why bother writing a story with that as the dominant narrative?

37 comments:

Wow - Good takedown John. More writing from a guy who writes with seeming authority about topics that he doesn't really understand. Ponzi schemes are possible in the oil and gas industry, but they are generally pulled off at a small scale by fly by night operators. They hype their prospects and lure investors in with inflated numbers but at some point the thing falls apart.

If this were a single operator I'd be worried. In fact I was pretty skeptical on shale gas myself in the beginning. But companies that started drilling wells 5 years ago in the Marcellus are still drilling wells in the Marcellus. In fact they drill more wells each year. That tells you something. Perhaps the most obvious reason to dismiss this article is that all of the majors (Shell, Chevron, Exxon) are now involved in shale gas. These companies have been around for a long time and plan to be around for a long time. they have the top people in the business working for them and can smell a scam a mile away. They have not become as rich as they are by getting into plays that don't make money. They have obviously looked at the economics and found something that they truly believe is going to make money.

Say you were making widgets. Your first widget plant was in Texas where it cost $5 to make a widget. As long as you can sell widgets for $7 you still make a profit. then suppose that a new widget plant opens in PA where they can make widgets for $3. They flood the market with widgets and the price drops to $5. It is no longer worth making widgets in Texas at this point so you stop making them there. This is all that is happening with shale gas. The economics are better in the Marcellus so the companies stop drilling in the Haynesville and Barnett.

The price of gas is key to the economics on all oil and gas plays. Most shale gas plays probably can't make money at $4/mcf. I have heard that the Marcellus is still profitable at that price in both northeastern and southwestern PA. This is because the production rates are high and the gas is being produced very close to major markets so transportation costs are low. I have heard that most parts of the Barnett Shale are not economic at $4 but are economic at $6/mcf. When they first started drilling the Barnett, it was profitable because the price of gas was higher. They stopped drilling when the price became so low that they could not make a profit.

When the price goes back up, which it eventually will over time, people will start drilling wells in the Barnett and Haynesville again. That is how it works. It's not a scam, it's just business.

And another thing! As you pointed out, this guy's use of anonymous, confidential memos and emails should really raise a red flag with his editors and with readers. Who are these people? Do they have any credibility? They could be disgruntled employees or have unstated agendas. They may know what they are talking about or they may not have a clue. For that matter, they may not even exist! We have no way of knowing...

You are absolutely correct to hammer the anonymous material that is used consistently by this reporter to reach his highest heights of sensationalism. All the juiciest, spiciest most sensationalistic quotations or references are anonymous. So the reader cannot know whether the anonymous speaker is credible or not. Or whether, as you point out, the anonymous speaker is a disgruntled employee or has some ax to grind. But it is good copy and vital to the narrative so it is news fit to print.

I think you missed the point of this article. I think that Urbina's hitting on an important story with his analysis of these emails - it's as simple as this: the industry will display a positive picture of their product to the public, despite uncertainty about their ability to deliver that picture.

Of course they should do this, it's just good business.

But it is a wholly appropriate thing to report about as we struggle with figuring out how to regulate deep fracking. We need to be reminded of the perspective and agenda of the industry.

I think it's a particularly important point to make right now, because in many forums around the state that are writing these regulations, the industry seems to be the most powerful voice in the room.

Is it sensationalism? of course it is, it's the emails from people who didn't know they'd be shared. But it's also what the Freedom Of Information Act was all about.

People generally are distrustful that the industry is telling us the truth when they say "Drilling is safe.", "there has been no contamination of water from deep fracking", "safety is our number one goal" Such absolutes don't fit the sniff-test.

I quote from Mitch Troutman's article at Pennsylvania From Below, 5/23/2011, which I find quite convincing in considering your criticism of Ian Urbina to be unfair, and, once again, overboard on promoting the natural gas industry at the expense of the environment.

One of Hanger’s main criticisms was that the Times did not interview him before the running the series. But Hanger, who left the DEP in January, left out that the paper requested twice to interview him before the first story ran, according to the reporter who wrote the series. Hanger’s staff did not respond to the requests for interview, so the paper submitted questions by email to the department. The Times submitted so many questions to the DEP that officials within the agency complained to the reporters’ editors that the newspaper was taking too much staff time. The paper also verified by email with Hanger’s department that quoted comments from him were accurately reported. After the first story ran on February 27, the Times interviewed Hanger about matters covered in the series.Rather than responding to the content of the Times series, natural gas industry PR representatives have focused on Hanger’s criticisms [1, 2]. When Pennsylvania from Below asked Ian Urbina, author of the Times series, about Hanger’s response to the articles, Urbina replied, “Honestly, I’m trying to just focus on the story and the facts.”Hanger did state that the DEP needed to begin testing for radium or radioactive pollutants to “resolve the issue raised by the NYT.” Corroboration for the Times’ other revelations can be found from other sources. The E.P.A., for instance, immediately instructed Pennsylvania to step up monitoring. The folks at FracTracker found the Times to be on the mark. When the Philadelphia Inquirer re-crunched the recycling numbers that the Times used, they too found that the state and the industry have significantly overstated how much drilling wastewater is getting recycled.

The NYT reporter had access to this information but he deliberately essentially excluded it from his story because it contradicts his ponzi, enron frame. He has done this to readers before and he will do it again because the NYT won't stop him.

G. Smith, I understand your position and much of what you say is true. Industry should not be trusted. Their main goal is to make money and this should never be forgotten. That is why we need strong, consistently applied regulations. It is also possible that companies might hype a prospect that they know does not have much of a chance of success if they are trying to sell it. That is not the case here. Dozens of companies are involved including the majors and they are spending billions of dollars. This tells the informed person that this is real and not a con job.

The worst thing about the NY Times article is that it introduces another non-issue to the debate that further confuses an already confusing issue. A thoughtful article on the different economics of each shale would have been much more informative. Basically the real story is something like this (don't quote me on numbers as they are not correct): The average cost to find and produce gas per mcf is $2 in the Marcellus, $3.50 in the Haynesville and $5 in the Barnett. Gas is currently selling for $4.30/mcf. So they stop drilling Barnett wells, curtail drilling of Haynesville wells and go whole hog in the Marcellus. On top of that, there are sweet spots in each shale play that have better economics than other areas so these are drilled preferentially. It's driven by geology and proximity to pipelines and markets. Again these numbers are not exactly accurate but this is roughly the story. A real story on economics would have been much more informative and no less interesting. The NY Times just keeps putting non-issues into the dialog that confuse readers more than inform them.

Which plays are drilled also depend on the natural gas liquids coming along with the gas, which are priced closer to crude oil. Reliable information from West Texas says that gas from the Sprayberry Formation can be given away and the wells are still profitable due to the liquids that can be sold into markets like propane products. Same for Eagle Ford Formation in South Texas.

I would ask that you read my discussion of nyt reporter's decision to quote but not interview me. See the February Archive and postings of February 28th. Link at http://johnhanger.blogspot.com/2011/02/not-interviewed-but-quoted-errors-and.html.

Amazingly though the nyt reporter could not interview me before February 27th, the date the article was published, he did manage to call me at my home on sunday February 27th as the world read his duplicitous handiwork. Strange that he could not find me and then found me with no problem.

Also see the 4 postings in the May and June archives reporting the radionuclide testing results. All results prove the nyt reporter's piece to be fundamentally false.

I read with interest your comments, Mr. Hanger, and I must point out a few discrepancies which you have overlooked.

1.) The U.S. has ALWAYS produced virtually all the natural gas it consumes so arguments from industry and it would seem government officials such as yourself about saving us from terrorism, protecting national security, etc. are simply hype.

2.) Gas prices historically are about $6/mcf. We are trading closer today to historic prices than in 2008 when they hit $14/mcf. That was the TRUE aberration. Even a price of $8 which you mention is still an aberration from historic prices and a level we are not likely to see within at least the next 5 years.

3.) Which segues nicely to the next point, which is that had these shale operators been running their businesses in a prudent manner then production would have been choked off and wells shut in quite some time ago. Instead, they chose to keep producing. Why? Because they had to keep up debt service and since they had NO CASH on their books they could not do this without bringing more and more gas online. That is exceedingly poor resource stewardship. Not something to brag about.

4.) Your comments about the Marcellus are misleading, reckless and irresponsible because there is simply not enough data available yet on a large enough quantity of wells to adequately determine whether the play is indeed sound. There is, however, significant data available in older plays like the Barnett and Haynesville which clearly shows that the wells do not meet expectations. By the way, the Penn St. professor you refer to did state that the Haynesville "has not lived up to expectations", a point you failed to mention.

5.) your point about the Majors interesting in that you failed to note that the Majors have been unable to grow reserves for over a decade now. Reserve growth drives share price. Perhaps, just perhaps, they see the "incredible growth" in shale reserve claims as a way to boost their own share prices. These companies, unlike their shale counterparts, actually DO sit on mountains of cash, so why not invest in growing your reserves that way and thereby boost your share price. If you don't think this is a possibility, think again!

6.) And finally, as to liquids production, also called unconventional oil, you failed to note that it is the most carbon intensive, least efficient hydrocarbon to burn. In addition, it requires substantially more water and in general costs far more to produce than traditional sources of oil. The reason these companies are moving into this is because they are geared up to do horizontal production and the monies have dried up for them to some extent in the capital markets. They needed a new vehicle under which to raise monies. And how very convenient that, just like shale gas, these plays are new and we will not be able to verify numbers for quite some time on the individual plays. A bit too convenient if you ask me.

"I quote from Mitch Troutman's article at Pennsylvania From Below, 5/23/2011, which I find quite convincing in considering your criticism of Ian Urbina to be unfair, and, once again, overboard on promoting the natural gas industry at the expense of the environment."

I don't see John Hanger as promoting the natural gas industry at all. I see him promoting natural gas as a source of energy. There is a big difference! The industry needs to be closely regulated and few have done more to make this happen than John Hanger. If his allegiance was to the gas industry he would not have increased regulations, fees or oversight, all of which cost the industry money. This is a very important distinction.

It highlights an important point. It is very common for people who are concerned about global warming and pollution to be anti-oil industry. For many this is a holy war - anything the industry does must be evil. There are some, like John Hanger, who can get past that sort of holy war mentality and see that natural gas is a whole helluva lot better than coal and oil as a source of energy from an environmental perspective. If you really care about global warming and the environment, then you should be FOR well-regulated shale gas development. There is no single thing that will reduce carbon emissions and pollution more over the next decade than switching from coal to gas.

The industry wants to make money and will do what it takes to turn a profit. Count on that as their primary motivation. But in this case, the thing that they want to do to make money just happens to be in our best interest environmentally.

Now for many, the holy war aspect is more important than what is actually best for the environment here in the real world. For these people, their identity is wrapped up in being against the oil and gas industry or the "evil other." So everything is viewed through that lens. It would help if people were not like this but I am afraid there are more who take sides like fans of a football team or adherents to a religion than who just look at the facts and make a decision.

Dear John Hanger,Thank you for your fact-based response to the NYT front-page non-factual story. I wonder if the NYT will run your response as a Letter to the Editor. They should given the prominence and controversial nature of Mr. Urbin's story. If they do not, the NYT should be labeled as a flame-throwing tabloid rather than a respected news organization that engenders honest reporting and open debate.

@Concerned Scientist, you're right, the point is that the industry shouldn't be trusted. An article that compared the different shale plays would also be good, but that's not what this article was about. It also wasn't really about MS being a Ponzi scheme (that was a quote from an industry representative, not Urbina). As for the anonymous quotes, the extraction industry (and corporations in general) have a pretty un-favorable view of whistle blowers. Some people in my town won't even talk to me about fracking because they're afraid they'll lose their job. It's not surprising at all that people are nervous to tell a reporter that the Official Story coming from the industry is, in this case, exaggerated.

@John Hangar, the AP article only quotes the numbers and experiences of the industry. Of course it's great news, but I think Urbina's article would caution readers to take what they have to say with a grain of salt. Of course they're going to say Marcellus Shale drilling is all rainbows and ponies. They want to do more of it.

I also think that you've got to move past Urbina's Feb. article that you felt wronged you. Other major outlets agreed with that article, and it seemed to have lead to more testing, and verification that radiation has not leaked. That's great news. In this article, he's done what an investigative reporter should do, he identified a source of information and wrote about it. If you have reason to disagree with what was in those emails, then that's great, but I'd call it good reporting.

@Carbon Black, you're right, it was an open-records request, not a FOIA. But I believe it is in the same spirit of accountability.

1.) The U.S. has ALWAYS produced virtually all the natural gas it consumes so arguments from industry and it would seem government officials such as yourself about saving us from terrorism, protecting national security, etc. are simply hype."

UMM, prior to shale gas it looked like production had peaked in 2001 and was declining into 2006. no matter how many wells we drilled production continued to decline. this led to the big price spike. We were importing about 25% of our gas as of 2007 and are still importing about 18%. We were talking about building huge Liquid Natural Gas (LNG) terminals and importing gas from the Middle East and other parts of the world. This may still happen but shale gas is making that much less attractive. See this website for the facts

http://www.eia.gov/dnav/ng/ng_move_impc_s1_a.htm

2.) Gas prices historically are about $6/mcf. We are trading closer today to historic prices than in 2008 when they hit $14/mcf. That was the TRUE aberration. Even a price of $8 which you mention is still an aberration from historic prices and a level we are not likely to see within at least the next 5 years.

Gas prices were next to nothing from 1922 to the late 1970s, $2-3/mcf from 1980-1999. The price spike happened when it looked like production had peaked. The price has come back down now to around $4/mcf. My guess is that it will drift upward over time to around $5 where most LNG works and that will keep the price in the $5-$6 range. See this website for the facts

http://www.eia.gov/dnav/ng/hist/n9190us3a.htm

"3.) Which segues nicely to the next point, which is that had these shale operators been running their businesses in a prudent manner then production would have been choked off and wells shut in quite some time ago. Instead, they chose to keep producing. Why? Because they had to keep up debt service and since they had NO CASH on their books they could not do this without bringing more and more gas online. That is exceedingly poor resource stewardship. Not something to brag about."

They drilled the wells when gas as $8/mcf, then it dropped to $4. What would you do? They don't control the price. The wells are already drilled and they have to pay to maintain and operate them. Also, companies sometimes have to drill wells that don't make sense economically to hold on to their leases. They want to hold on to their leases in hopes that the price will go up again.

It's a risky business and some companies do go broke gambling on the price of gas. It's difficult when it changes as much as it has over the past few years.

"4.) Your comments about the Marcellus are misleading, reckless and irresponsible because there is simply not enough data available yet on a large enough quantity of wells to adequately determine whether the play is indeed sound. There is, however, significant data available in older plays like the Barnett and Haynesville which clearly shows that the wells do not meet expectations. By the way, the Penn St. professor you refer to did state that the Haynesville "has not lived up to expectations", a point you failed to mention."

The Barnett, Haynesville and Marcellus have different economics. They are not the same geologically, are different distances from the market and some have associated liquids. Is this message getting through?

Companies that started drilling wells in the Marcellus 5 years ago are still drilling wells today - in fact they are escalating their drilling programs. What does this tell you? The Marcellus is exceeding the expectations of most companies and analysts. That is just a fact.

"5.) your point about the Majors interesting in that you failed to note that the Majors have been unable to grow reserves for over a decade now. Reserve growth drives share price. Perhaps, just perhaps, they see the "incredible growth" in shale reserve claims as a way to boost their own share prices. These companies, unlike their shale counterparts, actually DO sit on mountains of cash, so why not invest in growing your reserves that way and thereby boost your share price. If you don't think this is a possibility, think again!"

These companies are in it for the long haul. They see the future and it is shale. They do want their stock prices to go up but they also want to make money and to be here in 50 years. As upsetting as it may be to you, the Marcellus is a money-maker for most companies involved.

"6.) And finally, as to liquids production, also called unconventional oil, you failed to note that it is the most carbon intensive, least efficient hydrocarbon to burn. In addition, it requires substantially more water and in general costs far more to produce than traditional sources of oil. The reason these companies are moving into this is because they are geared up to do horizontal production and the monies have dried up for them to some extent in the capital markets. They needed a new vehicle under which to raise monies. And how very convenient that, just like shale gas, these plays are new and we will not be able to verify numbers for quite some time on the individual plays. A bit too convenient if you ask me."

I think you are confusing oil/condensate from the Marcellus, Bakken and Eagle Ford with the tar sands of Alberta. The Marcellus, Bakken and Eagle Ford plays are not nearly as energy and water intensive as the tar sands operations. You might want to read up on the difference. The tar sands have to be heated to reduce the viscosity and get the oil to flow - that is why it is so carbon intensive. There is no heating involved with Marcellus, Bakken or Eagle Ford.

Tell me something. How does someone who was in PennFuture and in charge of the DEP feel about the fragmentation that is certainly going to occur to Pennsylvania's forests as a result of Marcellus (and Utica) shale drilling?

We all hear about water and that is obviously important. But from a broader forest ecosystem perspective, the next decade is going to fundamentally transform rural PA forestland from intact, functioning ecosystems to fragmented industrialized landscapes.

And you are ok with that? Because there is no "lessening" the impact on the ground. You can possibly do everything you can to protect ground and surface water - but you have to cut the trees down for the roads and well pads. And that is going to devastate our forests (state and private).

I supported and continue to support Governor Rendell's Executive Order imposing a 3-year moratorium on further drilling in the state forests. Indeed John Quigley and I recommended to Governor Rendell that he issue the order. He issued the order after the House of Representatives passed a bill imposing a state forest moratorium by a vote of 150 to 50 and after the state senate refused to vote on the bill in October 2010. Governor Corbett said in the campaign that he would immediately rescind the Executive Order. He has not so far done so. Doing so would probably mean the state forests lose their sustainability certification and that in turn would cause thousands of timbering jobs that require the certification to be lost.

As to private lands, I have consistently said private land owners should be allowed to make decisions about the use of their lands and that any gas drilling that occurs on private lands at the direction of their owners must be strongly regulated. I enacted 4 packages of regulations from September 2008 to January 2011 that all strengthen the regulation of this industry. Regulations include site controls and restoration requirements. I also support a drilling tax with proceeds in part funding Growing Greener to address many of our legacy, continuing habitat, water and other problems. That funding would be an opportunity to do important restoration work.

I have also said that gas drilling is industrial activity that cannot be done without zero impact. It does have impacts.

But its impacts are much less in the production and combustion process than coal and oil. This nation gets 60% of its total energy from coal and oil. You say no to gas you are saying yes to coal and oil. Nobody has done more than me in Pa for renewables and energy conservation. I am thrilled that we have 16 operating wind farms and 4 more under construction and that we have 6,000 operating or under construction solar systems. Renewables and efficiency are vital and should be accelerated. But renewables will have a great decade if they account for 20% of total US energy by 2020. That will leave 80% coming from coal, oil, gas or nuclear. That is the reality.

Tell me something. How does someone who was in PennFuture and in charge of the DEP feel about the fragmentation that is certainly going to occur to Pennsylvania's forests as a result of Marcellus (and Utica) shale drilling?"

This person is a bit off base but does hit on what I think is the real thing that environmental groups should be fighting for and that is for minimal visual and surface impact.

This person is off base because the landscape will hardly be "industrialized." The plan is to have a well pad every 480-640 acres from which multiple wells are drilled. 640 acres is a square mile. It might even be possible to have one well pad every two square miles. The well pads will require about 3-5 acres of clearing plus a road. So say the road takes up 2 acres of land that is about 5-7 total acres. Let's call it 6.4 acres. 6.4/640 = 1/100. So roughly 1/100 of the land is/will be cleared. The actual tanks and well heads will probably cover about 1/2 to 1 acre of that land. So it is hardly industrialization of the landscape. A house or barn would have a similar impact.

In a wooded area, it will be hard to see the well sites from farther than a hundred yards. In cleared areas, well sites could be an eyesore for some distance. I would be for strong community involvement in the placing of well pads to minimize visual impacts. Perhaps creative things could be done to camouflage the well sites. This is a battle worth fighting though.

I find it unlikely that this will destroy any ecosystems but am open to the idea that it could happen. Everything possible should be done to make sure this does not happen. I would be very interested to see any actual studies by disinterested scientists on this.

Thanks for the post John. Hats off to the Times for their online source material and links to the actual emails & reports in question, but it brings to light a real problem with article in that it relies on a lot of dated material. Many of the quotes and skepticism are from 2009 or 2010 source material. I was a shale gas skeptic in 2009. Today, following the Marcellus closely, it is absurd to think that the industry's 2009 well and potential reserve estimates were overly optimistic. To the contrary, wells have proved to be bigger with flatter initial declines than anticipated. Clearly, how wells will continue to perform overtime is a big question, but the evidence so far is compelling. For reference, in March of 2009 Chesapeake suggested they had 4,100 risked net undrilled wells and expected avg. reserves per well of 3.75 BCF over their 1.3 million net acre position. By October 2010 their actual well results indicated average EUR over 5 BCF. PA production data at year end 2010 suggested that 5 BCF might be low for their Pennsylvania wells. At a minimum, Chesapeake publicly underestimated the potential in Bradford and Susquehanna counties by a significant factor.

Today there is a strong case to be made that shale gas has been the opposite of a Ponzi scheme. The operators that may have gotten into trouble are the ones that have underestimated the scope of the shale gas impact on gas price. The Barnett and Haynesville have not disappointed, they just have to compete with the Marcellus and the Eagle Ford. Again with Chesapeake, on March 2009 they predicted per well EUR to average 6.5 in the Haynesville and by October 2010, their wells were averaging production consistent with 6.5 BCF EUR production. The disappointing part was that the price of gas in fall of 2010 was closer to $4.00 than the $6.00 + price that Chesapeake and nearly everyone else anticipated. Arguably the abundance of shale gas reserves is a major factor in the historically low price of gas.

I encourage you to take a look at north-central Pennsylania in Google Earth. Zoom in and appreciate how unfragmented much of that landscape is because it isn't going to last long.

The well pads are anywhere from 3-7 acres. Then you have the holding ponds which can be another couple acres. And I've seen wells much closer together than the figures you're using.

Regardless, even if your figures are accurate, imagine that kind of development superimposed over the forests of north-central Pennsylvania. It is going to have a profoundly significant impact on those forests. And it isn't just a concern about viewsheds...it is about species decline. Pennsylvania is blessed to have such intact forests in the central part of the state. Marcellus and Utica shale gas drilling is going to fundamentally and, perhaps, irreparably alter that.

That is not Marcellus drilling in that part of PA = Those are much older wells.

I would be opposed to anything that will cause a significant change in the ecosystem. Show me evidence that this is true and I will join your fight to protect those species. Do you think building a house with a driveway every square mile would cause a similar problem? In the end, that is pretty much what the footprint will be like after they complete the wells.

That said, I think this is a good fight. Fight for the smallest possible surface footprint. The technology exists for one well pad per square mile or even one well pad per two square miles.

Someone turned me onto this blog this morning and I rather hoped that the content would be of a higher caliber. There seems to be a lot of misinformation that sounds like it came directly from industry press releases. I was hoping for more. One of the most sensible comments I see is the one from anonymous "clarifying" the confusion on nat gas. That guy knows his stuff. To make the assumption as Concerned Scientist did, that just because companies are drilling in the Marcellus is a good indication that they are making money is ludicrous. They had a drilling frenzy in Barnett and then when the production history started looking nasty, they cleared out as fast as possible. Ches has sold off most Barnett assets, Range completely sold out in spite of telling analysts on their call only 6 weeks earlier that the Barnett was one of their core holdings and the list goes on. Quicksilver out....Anonymous is right, we can't verify the numbers in the Marcellus so I am not putting any more eggs in this basket.

As for the criticism of the NYT for dated material. Huh? To my mind, the fact that the material was spread over several years and was found at so many levels of these companies showed a much more comprehensive and pervasive problem. I was impressed with the Times work. Sorry guys. The same old rebuttals are starting to sound tired.

I am a mineral owner in the Eagle Ford... The play runs from the Country of Mexico to East Texas. I would like to see you find a significant number of trees to cut for pads and roads in about 3/4th to the South of the play. It is mostly scrub brush. You tree huggers come on down to Texas and take a look...........

This thread provides a perfect example of why developing energy policy for the U.S. is such a challenge. Too many folks seem to focus on the faults of a single energy source, without addressing the alternatives or demand. We see it with arguments against coal, wind, nuclear, hydroelectric, solar, geothermal, and natural gas. But yet, we Americans expect our stoves to heat up when we turn the knob, lights to turn on when we flip the switch, cold rooms to warm up when we crank up the thermostat, and hot water to pour from the faucet when we turn the handle.

When will we stop pretending that all of those demands come without any cost?

I should have said overboard on promoting natural gas as a source of energy at the expense of the environment, rather than "overboard on promoting the natural gas industry at the expense of the environment."

I don't feel that I am in a holy war. I do understand that natural gas can be an improvement over coal if done in a highly regulated way, and I am grateful to John for making that clear. I think though that if we can build the political will, we can speed up the development of renewables for our energy. And I don't accept that the choice is between energy or the environment. I see the gas industry using John's blog work as a promotional tool with which to push back against people with reasonable environmental concerns. And only in that sense does his promotion of natural gas as an energy source seem to me to be at the expense of the environment.

"Someone turned me onto this blog this morning and I rather hoped that the content would be of a higher caliber. There seems to be a lot of misinformation that sounds like it came directly from industry press releases. I was hoping for more. One of the most sensible comments I see is the one from anonymous "clarifying" the confusion on nat gas. That guy knows his stuff."

Let's see, that wouldn't have been YOU who wrote that could it? That was the most confused thing written in these comments. If you read John Hanger you will hear him criticize the industry when warranted. It could always be done better.

"To make the assumption as Concerned Scientist did, that just because companies are drilling in the Marcellus is a good indication that they are making money is ludicrous. They had a drilling frenzy in Barnett and then when the production history started looking nasty, they cleared out as fast as possible."

You actually make my point for me here. They are not clearing out of the Marcellus - they are drilling even more. And the majors are moving in. And apparently everyone hasn't cleared out of the Barnett as the production is at a record high.

To clarify the problem with skeptical remarks from 2009 - In 2009 the production / drilling results were primarily from the Barnett with a couple of years of Fayetteville results. There really wasn't much proof to a non geologist that shale gas was for real and that it would have dramatic impact on the industry. Since then, thousands of wells in 3 or 4 more plays have provided a mountain of new evidence. In early 2009 a new well in PA that could produce 3 MMcf/d at peak was real news that an operator would be pleased to share. Yesterday we read about Cabot wells in PA that hit 30 MMcf/d. Literally, the best wells are 10 times better than when the questionable quotes were made.

Whether in error or by design it is invalid to use anonymous expert quotes from 2009 to assert that in 2011 we should be skeptical of shale gas production. The NYT really should be better than that.

After reading John’s response to Stanley (included below) under another heading this morning, I take back my earlier criticism, and, in fact, applaud John's positive work for the environment.

Stanley: I think I do know better. That is why I led Pennsylvania's successful efforts to build 16 operating wind farms, with another 4 wind farms under construction now, operate or have under construction 6,000 solar facilities, 50 biodigesters on farms, 43 landfills capturing methane and converting to electricity, and passing in 2008 Act 129, one of the five biggest electricity conservation programs in the USA. But even if one counts corn ethanol and large hydro, renewable energy will be doing well to provide 20% of total US energy in 2020. So where do you want to get the other 80% in 2020 or 89% of energy from now. Coal, oil, gas or nuclear? As we accelerate deployment of renewables to get to 20%, where is the other energy going to come from? If you don't like gas, that means you are choosing coal, oil, nuclear. But new nuclear takes at least 10 years to build and will only get built if the national government completely pays for it, as a result of the high up front capital costs, to say nothing about the waste issue. I also live in the Three Mile Island evacuation area. I can bet you the people at Fukushima wish now the power plants in their neighborhood had been gas right when the earthquake hit. So what is going to supply the other 80% from now until 2020 and then what will provide the 70% or 60%? Gas and arguably nuclear will do less damage to the environment than coal or oil. The reality is not always perfect.June 27, 2011 8:44 PM

I appreciate the posting and the dialogue. I personally buy 100% wind energy electricity product for my home from wind farms in Pennsylvania. I would urge all readers who want to accelerate renewables to do the same and to support policies that will do so. I also drive a Prius and my wife and I have bought my children each one too. I am now in the market for a Volt, made in the USA. But most of our energy for a long time is going to come from something other than renewables. Gas has many advantages over the other non-renewable options. We must work to regulate it strongly and tax it reasonably and have it displace coal and oil as much as possible.

I also buy wind energy, moved close enough to walk to work and have a hybrid for when I do drive. I too am a big supporter of moving toward wind and solar as fast as possible.

Daniel - I am all for addressing reasonable environmental concerns and strong regulation. What gets under my skin are people who are making up problems that don't exist and forcing everyone to spend time addressing these fake issues. This distracts from the real issues. The NYT, Propublica and Gasland are forcing people to spend time on non-issues when they could be fighting for:

I will state up front that I worked in the oil and gas service industry for 30+ years and I still have friendas in the industry. I've ridden the booms and the busts all the way. I'll also state we wouldn't be in this mess if alternative energy was more important than cheap energy at any cost.

The Barnett is still going strong. Just because CHK has moved on doesn't mean it's over. Too many people don't understand the industry as a whole. When the majors and large independents (CHK) move on, the small independents move in. For a large company the Barnett is uneconomical under $5.00 gas, for others not necessarily.

I haven't read the article and, honestly, won't give it the time of day. I've read the same arguments for 30+ years.

Concerned Scientist quoted John and Daniel.I agree wholeheartedly towards moving away from fossil fuels.The distractions actually help the oil and gas industry.Your list of issues to fight for are admirable. Minimizing surface impact is great for forested areas, but as someone said earlier find some trees to cut down in South Texas or West Texas for that matter. The regulations need to be case by case, not a blanket deal.Most companies are doing all they can to minimize the truck trips. Especially at today's transportation costs.

If you want to move away from fossil fuels I'll give you a quote from a Master's Degree student from Germany in 1988. There is one caveat, your gasoline prices will go to $10.00 per gallon quickly and natural gas will skyrocket.

"If the US companies had to follow the regualtions we have in Germany, they couldn't afford to drill. All our locations have to covered completely in concrete with ditches to catch any water the touches the rig. Then it has to be hauled off and treated. None of it can touch the ground." He's talking about rain water also. If you get this one regulation in place a mass exodus to alternative enery will occur. This is a real conversation, not imagined.

But let's be real. This isn't going to happen over night. It takes a coordinated effort, not a lot of one side bashing the other. When that happens it sounds like our two main political parties, the ones who day they care about us. Mainstream America has to become the driving force and quit listening to the far left and far right tell us how to live. Use your own grey matter to sort things out. The distractions provide by such articles do give the industry a reason to push back.

I read the article and comments as a non-expert with the knowledge that the "experts" on both sides have a vested interest in slanting their responses to best support their own interests. In truth, I believe that the accurate facts fall somewhere in the middle. More than anything else, I refuse to accept any news story that does not offer verifiable facts and instead cites anon sources. I trust news reporters only slightly more than politicians.

About Me

I am an expert on energy, environment, green economy, competitive electric markets, and utility regulation with unique experience in and out of government. I am a Democratic candidate for Governor of PA. See www.hangerforgovernor.com. You can email me at john@hangerforgovernor.com. I have been both the Secretary of the Pennsylvania Department of Environmental Protection and Commissioner of the Pennsylvania Public Utility Commission. I have made leading regulatory decisions, testified to Congress and state legislatures, and been interviewed countless times, appearing on CBS evening News, NBC Evening New, CNN, BBC, CBC, and many more outlets. I am a 1984 graduate of the University of Pennsylvania and 1979 graduate of Duke University.